Financials Signaling Sustained Upside in Risk Assets?

The chart below shows the ratio of the SPX vs. XLF – when the ratio moves lower, financials out-perform.

The ratio is now breaking below support line (1).

This is important as every time the ratio has hit line (1) over the past few years broader risk assets and the SPX have been at a major, temporary top including spring 2010, 2011 and 2012.

To the extent that the ratio is breaking support it could mean a few things including:

1) Financials beginning a new, sustained trend of out-performance vs. the broader market

2) Risk assets in general beginning a new, sustained trend of upside

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